Superannuation: a central pillar of retirement

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Superannuation is a central pillar in Australia’s retirement incomes system. If it wasn’t for the deferment of wages into compulsory retirement savings, meeting the challenges facing an ageing population would be almost impossible.

The Government’s proposal to enshrine the purpose of superannuation into legislation as being to provide Australians with a decent retirement income is sound. In our submission to the Treasury on the objective of superannuation, we strongly support it, and argue that this clarity of purpose should aid both consistent policy delivery and industry development of additional retirement products and services to retirees.

We also proposed a series of changes to make the superannuation system fairer and stronger.

The tax benefits associated with concessional contributions need to be more evenly distributed across the Australian workforce. And those who have broken work records and/or low incomes, usually women, need exemptions from the current capping arrangements to help compensate for their reduced contributions. This is both equitable and will boost the productivity of our economy.

Owners of small and medium-sized enterprises also suffer from current regulations, which make it difficult for them to invest both in the business and their own retirement pots. There are limits on subsequent catch-up contributions once the business is more firmly established. We need to help our SME owners, who will be the source of many jobs in the future.

More flexibility is needed in the super regulatory framework if trustees are to be able to create innovative comprehensive income products for retirement (CIPRs), such as annuities. We would recommend a thorough review of any legislative obstacles to the product rationalisation and innovation that is necessary if the government’s objective for superannuation is to succeed.

If adopted, these recommendations, would help achieve the government’s objective of ensuring all Australians receive a decent standard of living in retirement.